Finance Why diversification matters It doesn’t take a PhD in finance to see the benefits of such an approach. By combining multiple investment types in your portfolio, you’re not betting big on a single investment or market outcome – you’re preparing for many, thereby minimizing the overall volatility in your portfolio. When one part zigs, the other part zags, helping you focus on your long-term financial goals instead of short-term market swings. That can help you avoid the emotional overreactions which can sometimes result when your portfolio shows a big swing in either direction. The following chart is a good visualization of why diversification matters. The chart tracks the performance of a selection of common asset and geographic allocations since 2014, as measured by the performance of several mutual funds and ETFs that track an index associated with the asset in question. Keep in mind that, because of the management fees, transaction costs and other expenses incurred by such funds, these numbers aren’t an exact replica of the performance of the underlying asset. But they’re pretty darn close. EM stocks 4.7% REIT 8.5% REIT 4.9% REIT -6.0% REIT -4.6% REIT -26.2% REIT 4.8% REIT 11.8% REIT 8.7% REIT 40.3% REIT 28.9% REIT 2.4% REIT 30.4% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 AVERAGE (mean) Gold 25.0% Gold 26.9% Gold -0.6% Gold 12.8% Gold -1.8% Gold 12.9% Gold 8.3% Gold -2.1% Gold -4.0% Gold -10.6% Gold 7.7% Gold 18.0% US small cap stocks 7.5% US small cap stocks -3.7% US small cap stocks -9.4% US small cap stocks -17.6% US small cap stocks 27.4% US small cap stocks 19.1% US small cap stocks 18.4% US small cap stocks 18.3% US small cap stocks 9.8% US small cap stocks 17.7% US small cap stocks 16.2% US small cap stocks 14.1% EM stocks -0.1% EM stocks 12.2% EM stocks 15.2% EM stocks 20.8% EM stocks 1.2% EM stocks 9.4% EM stocks -18.0% EM stocks 10.6% EM stocks 31.5% EM stocks -15.8% EM stocks -14.7% Canada stocks 9.4% Canada stocks 9.8% Canada stocks 21.5% Canada stocks 8.5% Canada stocks 4.8% Canada stocks -9.1% Canada stocks -8.7% Canada stocks 12.3% Canada stocks 25.7% Canada stocks -5.8% Canada stocks 21.2% Canada stocks 22.1% US large cap stocks 13.6% US large cap stocks 1.3% US large cap stocks 12.1% US large cap stocks 21.7% US large cap stocks 18.4% US large cap stocks 31.5% US large cap stocks 28.6% US large cap stocks 26.3% US large cap stocks 14.1% US large cap stocks 24.9% US large cap stocks -18.6% US large cap stocks -4.5% High Yield US bonds 14.4% High Yield US bonds -3.3% High Yield US bonds 0.8% High Yield US bonds -6.8% High Yield US bonds 6.5% High Yield US bonds 3.9% High Yield US bonds 14.9% High Yield US bonds 4.9% High Yield US bonds 4.0% High Yield US bonds -12.2% High Yield US bonds 12.4% High Yield US bonds 7.7% Intern’l stocks 5.3% Intern’l stocks -6.2% Intern’l stocks -14.8% Intern’l stocks 2.7% Intern’l stocks -0.4% Intern’l stocks 26.5% Intern’l stocks 22.6% Intern’l stocks 9.8% Intern’l stocks 11.7% Cash (Cdn MM) 0.0% Intern’l stocks -15.4% Intern’l stocks 18.0% Intern’l stocks 3.1% US bonds 2.5% US bonds 3.5% US bonds 8.8% US bonds 1.9% US bonds 7.7% US bonds -0.1% US bonds -0.5% US bonds 5.9% US bonds -13.1% US bonds -1.6% US bonds 5.7% US bonds 1.4% Canada bonds 2.4% Canada bonds 6.6% Canada bonds -2.8% Canada bonds 4.0% Canada bonds 2.6% Canada bonds 8.6% Canada bonds 7.3% Canada bonds -11.7% Canada bonds 1.0% Canada bonds 3.3% Canada bonds 8.3% Canada bonds 1.3% Intern’l bonds 2.4% Intern’l bonds 4.7% Intern’l bonds 1.1% Intern’l bonds 8.8% Intern’l bonds -2.2% Intern’l bonds 3.7% Intern’l bonds 8.8% Intern’l bonds 2.9% Intern’l bonds 7.9% Intern’l bonds 4.5% Intern’l bonds 2.7% Intern’l bonds -12.9% Cash (Cdn MM) 0.8% Cash (Cdn MM) 0.5% Cash (Cdn MM) 0.5% Cash (Cdn MM) 0.6% Cash (Cdn MM) 1.6% Cash (Cdn MM) 0.5% Cash (Cdn MM) 4.7% Cash (Cdn MM) 1.5% Cash (Cdn MM) 4.7% Cash (Cdn MM) 1.7% Cash (Cdn MM) 1.3% Annualized returns, selected assets 2014-2024 Chart data: Yahoo Finance, Vanguard, iShares, Morningstar. CSANews | SUMMER 2025 | 27
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